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Another fine mess

Hardly a day goes by without a headline citing another FSA fine, which I find totally depressing. In fact, it was recently reported that FSA fines have tripled in the last 12 months.

What I have noticed is that the fines are increasingly imposed on firms that have not dotted every i and crossed every t rather than lost clients money. This culminated in JP Morgan Securities suffering a record fine of £33m for not segregating client money from money held by JP Morgan Chase Bank. The error had continued for seven years until JP Morgan discovered it, rectified it and reported it to the FSA and no client money was lost. It does beg the question, what were the 3,300 FSA staff doing for seven years while not spotting the error?

Our FSA fees totalled £12,000 for the year to date, which is an increase of 100 per cent on last year’s fees. Of this, £9,000 was paid to the Financial Services Compensation Scheme to compensate the clients of other failed firms such as Keydata. We contributed £200 to Gareth Fatchett’s Regulatory Legal firm to take the FSA to court and I urge other IFAs to do the same.

Down the plush corridors of the FSA’s offices in Canary Wharf, the number of FSA staff earning more than £100,000 has trebled over the last four years – rising from 81 in March 2006 to 241 last year. The regulator also awarded bonuses to 2,785 members of staff – almost 85 per cent of its workforce – with the biggest payout being 35 per cent of salary. It really would not be so bad if they were doing an effective job as a regulator.

IFA firms are responsible for just 2 per cent of all complaints received by the Financial Ombudsman Service, of which just 39 per cent are upheld. Bearing in mind that IFAs control more than 50 per cent of the market, this is a fantastic reflection of the quality of independent financial advice. The banks were responsible for 61 per cent of the complaints, of which 52 per cent were upheld. This begs the question, why are IFAs being so heavily targeted by the FSA?

It strikes me that any fines levied by the FSA should be paid straight into the compensation scheme and not into the coffers of the FSA. That would prevent them putting their noses in the trough. Such a scheme is unlikely to ever happen even although it makes perfectly good sense and I cannot help thinking that if such a scheme did exist then the number of fines and the size of them would be certain to fall considerably.The impending break-up of the FSA gives the Government the opportunity to reform financial services regulation. Let us hope it succeeds and keeps the grim reaper of the FSA at bay.

There are plenty of office parties and Christmas events going on at this time of year. But have no fear – you can still stay healthy while going out and enjoying yourself, with a little bit of planning!

Along with all the other firms that provide advice on defined benefit transfers, we received our questionnaire from the FCA about the quantity and nature of cases we have handled since 2015. By the time you read this, the deadline for its return will have passed and those under scrutiny will have breathed a collective […]

18th December 201812:39 pm

Comments

There are 7 comments at the moment, we would love to hear your opinion too.

Brilliant idea. IF the FSCS scheme is retained in its current format, then fines should be held separately to cover liabilities of failed firms to avoid/reduce the need to then apply levies on existing businesses. for it to go into FSA coffers and disappear on £600 per night hotel bills is madness. That the FSA in the first place can set its own budget and then bill other people who have no power to challenge it is also madness.

Very well said Tony and yes why why are IFAs being so heavily targeted by the FSA? There is no logic and come to that there is no logic in much of RDR.

THE REASON!
So let me take you back in time for an explaination from Adam Smith who took the view an economy runs automatically: But the process can be perveted by vested interests, who use government power to distort this free market system for theirown benefit …The proposal of any new law or regulation of commerce which comes from this odre, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspcious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppresed it.”

Adam Smith Ibid.,Book1,chXI,p.267,para.10

RDR will result in less choice, fees and tied products for most. If you want to see the logic in RDR look to those who will benefit!

There appears to be more logical sense coming from comments on these type of sites, than the FSA could ever come up with. They basically can do what the hell they like as they are not responsible to anyone for their actions(theoretically the government) but they are all in it together. The FSA is Judge, Jury and Executioner. The reason they go for the small ifa, is that the ifa does not have a bottomless pit of money to argue the case pay the fines, or some one with enough power. (Despite organisations representing the IFA claiming they have) The big banks etc pay the big fine and carry one operating. Can you imagine the FSA, stopping such as Barclays from operating(following the words or John Wayne the actor in one of his films “Like hell they will”

I think the unfortunate thing about the FSA is that it is not serious about actually policing and deliving a better financial market.

The FSA is in the news business. It targets IFA’s as this makes good headlines.

As has been well summarsied by the comments above, IFA’s represent a small percentage of complaints and don’t have the capacity to challenge the FSA, what they do, and what they say, so the FSA propoganda machine marches on, focssing on the headlines in the news to justify their own inadequacy.

It is a classic case of smoke and mirrors … lots of news about fines etc, hiding the fact that the FSA doesn’t do the job it is intended to do.

The FSA, were it to deign to respond to an article such as this, would cite the fact that whatever fines it levies must be used to offset the overall cost burden imposed on the entire industry. However, the problem with such an argument is that the FSA appears to be subject to nothing in the way of any regulation as to how it deploys its resources. So it pays its staff whatever it likes and is subject to no constraints as to how it spends the rest of its budget. Small wonder then that the FSA is routinely accused of being a gravy train for the fortunate few.

There was talk a year or two back of intervention by the NAO, but nothing seems ever to have actually come of that proposal. As a result, the gravy train rolls on without restraint and all Adair Turner does is call for more money, more staff and more power.

What about some effort being made to hold the FSA to the Statutory Code of Practice for Regulators? Of that we hear nothing either and I have still to receive any meaningful response to my request under the FOI Act for details of what body is responsible for enforcement of the Code. It’s almost as if the entire subject is off limits to enquiry. The BIS washed its hands of my request and passed it to the Treasury. The Treasury washed its hands of my request and passed it to the FSA. The FSA has so far ignored it.

I wrote to the Information Commissioner to complain and have so far received nothing but a cursory acknowledgement. I wrote a reminder to the Information Commissioner and that has so far been ignored. I wrote to my MP on the issue seeking his intervention. He wrote to the FSA which, in turn, issued a typical non-response that didn’t even mention the Code, of which my MP sent me a copy. I wrote back pointing out that the FSA’s response is in fact a complete non-response that didn’t even mention the very subject of my original request. That letter has so far been ignored.

If this is the way in which the FSA is permitted to act in response to requests under the FOI Act, then of what value is the Act? All it tells us, yet again, is that the FSA is allowed to act with complete disregard for the Law of the land and that no effort whatsoever is made to hold it to account. Not, it seems, by anybody.

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